Executive Summary: Key Legal and Evidentiary Issues

• Scope and interpretation of the parties’ contractual obligations and whether HarbourEdge’s conduct amounted to a breach of contract.
• Application of the organizing principle of good faith and whether any independent duty of honesty or good faith performance was violated.
• Weight to be given to the trial judge’s factual and credibility findings, and whether there was any palpable and overriding error in those findings.
• Limits of appellate review, including that an appeal is not a rehearing or an opportunity to relitigate the case with new theories or legal arguments.
• Proper framing and pleading of grounds of appeal, given the appellants’ numerous, often vague, and in some cases new arguments not raised at trial.
• Discretionary nature of trial and appellate costs awards and whether the significant costs ordered against the appellants produced an unjust result.

Background and parties
CanSport Incorporated, together with its principal Lee Adamski, entered into a commercial relationship with HarbourEdge Mortgage Investment Corporation, a mortgage investment entity that provided financing in a secured lending context. The relationship was governed by contractual documents setting out CanSport’s obligations to HarbourEdge and HarbourEdge’s rights and remedies as lender or investor. The dispute that followed centred on whether HarbourEdge had complied with its contractual and good faith obligations, and whether any of its actions had caused Can*Sport and Mr. Adamski compensable loss.

Facts of the dispute
The underlying trial decision, later reported as 2024 NSSC 98, canvassed in detail the factual background between the parties. Can*Sport and Mr. Adamski advanced claims that HarbourEdge had breached contractual obligations owed to them, acted in bad faith, and caused them significant financial losses. Their theory was that HarbourEdge’s conduct under the contract – whether in enforcing its rights, managing the relationship, or responding to financial difficulties – went beyond the bounds of the agreement and the duty of good faith. HarbourEdge denied liability, relying on the wording of the contracts and on the factual record to argue that it had stayed within its bargained-for rights and that any losses alleged by the appellants were not legally attributable to it. The trial judge made a series of key factual findings about what was said and done between the parties, how the contracts operated in practice, and the credibility of the witnesses. Those findings ultimately supported the conclusion that HarbourEdge had not breached its contractual duties and had not acted in bad faith. The judge further concluded that, even accepting parts of the appellants’ narrative, their alleged damages were not established in law or in fact in a way that could ground liability against HarbourEdge.

Proceedings at trial
At first instance in the Supreme Court of Nova Scotia, Justice Ann E. Smith dismissed the appellants’ claims in their entirety. The judge held that HarbourEdge was not liable for any losses the appellants said they suffered, after applying the relevant contract and good faith principles to the factual findings she had made. In doing so, she provided detailed reasons explaining why she accepted certain evidence, rejected other evidence, and how those findings underpinned her conclusion that the respondent had not breached its obligations. The judge also considered the legal framework on good faith in contractual performance and concluded that, properly applied to the facts, it did not assist the appellants. Having found for HarbourEdge on liability, the judge then addressed costs in a separate decision reported as 2024 NSSC 356. She ordered the appellants to pay $200,000 in costs to HarbourEdge, reflecting both the scope and complexity of the trial and the complete lack of success on the appellants’ claims.

Appeal to the Nova Scotia Court of Appeal
Can*Sport and Mr. Adamski appealed both the merits decision and the substantial costs order to the Nova Scotia Court of Appeal. Between their Notice of Appeal and Amended Notice of Appeal, they advanced 25 grounds of appeal, ultimately abandoning one. Many of these grounds challenged the trial judge’s interpretation of the contracts and her application of the duty of good faith, while others attacked her factual and credibility findings and her assessment of damages. Several grounds attempted to introduce entirely new arguments or points of law that had not been pled or argued at trial, and some asserted that the trial judge had made findings she in fact never made. The Court of Appeal, constituted by Bryson, Bourgeois and Van den Eynden JJ.A., emphasized the limited role of an appellate court. It reiterated that an appeal is not a chance to re-run the trial or to seek a “do-over” in the hope of a better outcome, but rather a review mechanism focused on identifying actual legal or palpable and overriding factual error. After reviewing the record and the impugned decisions, the Court unanimously concluded that the appellants had not demonstrated any error. The trial judge had correctly identified and applied the governing legal principles, and her factual findings were solidly supported by the evidence.

Costs on appeal and final outcome
The appellants also attacked the $200,000 costs award made against them at trial, arguing that it was excessive or unjust. The Court of Appeal underscored that costs awards are highly discretionary and will not be interfered with absent an error of law or an injustice. Having already found no legal error in the trial decisions, the Court further held that the appellants had not shown that the trial costs award resulted in any injustice. On the contrary, given their lack of success and the manner in which they had advanced their claims, the award was within the trial judge’s discretion. Turning to the appeal itself, the Court dismissed the appeal in full and ordered costs on appeal in favour of HarbourEdge in the amount of $50,000. The appellants had previously paid $30,000 as security for costs, which the Court directed to be released to HarbourEdge, leaving a further $20,000 owing. When the original $200,000 trial costs award is combined with the $50,000 costs award on appeal, the total monetary consequences ordered in favour of the successful party, HarbourEdge Mortgage Investment Corporation, amount to $250,000 in costs payable by Can*Sport Incorporated and Lee Adamski.